Required information

Problem 17-5A Comparative ratio analysis LO A1, P3

[The following information applies to the questions displayed below.] Summary information from the financial statements of two companies competing in the same industry follows.

	Barco Company			Kyan Company					Barco Company			Kyan Company
Data from the current year-end balance sheets								Data from the current years income statement
Assets								Sales	$	770,000		$	925,200
Cash	$	19,500		$	32,000			Cost of goods sold		590,100			640,500
Accounts receivable, net		34,400			56,400			Interest expense		8,200			15,000
Current notes receivable (trade)		10,000			8,600			Income tax expense		14,800			25,542
Merchandise inventory		84,440			138,500			Net income		156,900			244,158
Prepaid expenses		6,100			7,400			Basic earnings per share		3.92			5.93
Plant assets, net		370,000			313,400			Cash dividends per share		3.81			4.03
Total assets	$	524,440		$	556,300
								Beginning-of-year balance sheet data
Liabilities and Equity								Accounts receivable, net	$	30,800		$	51,200
Current liabilities	$	62,340		$	97,300			Current notes receivable (trade)		0			0
Long-term notes payable		86,800			105,000			Merchandise inventory		65,600			111,400
Common stock, $5 par value		200,000			206,000			Total assets		378,000			422,500
Retained earnings		175,300			148,000			Common stock, $5 par value		200,000			206,000
Total liabilities and equity	$	524,440		$	556,300			Retained earnings		170,800			69,878

Problem 17-5 Part 2

2a. For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets, and (d) return on common stockholders equity. Assuming that share and each companys stock can be purchased at $105 per share, compute their (e) price-earnings ratios and (f) dividend yields. (Do not round intermediate calculations. Round your answers to 2 decimal places.) 2b. Identify which companys stock you would recommend as the better investment.

Complete this question by entering your answers in the tabs below.

• 2A Pro Marg Ratio
• 2A Tot Asset Turn
• 2A Ret on Tot Assets
• 2A Ret On Com Stock Equity
• 2A Price Earn Ratio
• 2A Div Yield
• Req 2B

For both companies compute the profit margin ratio.

(a)	Profit Margin Ratio
Company	Choose Numerator:	/	Choose Denominator:	=	Profit margin ratio
		/		=	Profit margin ratio
Barco		/		=		%
Kyan		/		=		%